Rental Housing 2011

The State of Rental Housing in the City of Los Angeles

Highlights

Inadequate housing takes different forms, all of which are detrimental to the well-being of families and individuals. The most prevalent problem is housing that costs more than households can afford to pay. The causes include a housing inventory that has grown slightly less than the population and renter incomes that have increased much less than the cost of housing.

The city’s rental housing inventory has grown 8 percent since 2007, largely because owner-occupied property that has been foreclosed and unsold since the start of the 2008 recession has been converted to rental use until the for-sale housing market recovers. In the near term, this increase in the size of the rental inventory is good news for renters. It increases housing choices and diminishes rent increases.

The bad news is that the incomes of renter households have been declining since 1990. There is year-to-year fluctuation in the median income of renters, but the overall trend is downward. Adjusted to account for inflation, renter incomes have declined about a fifth of a percent a year since 2000.

Rents continue to rise despite the limited budgets of renter households. In large part, this is because it is expensive to buy land and build housing in Los Angeles.

When incomes are overlaid on rent levels, we see that over the past decade, median rent as a share of median income of renter households has increased from 29 percent to 36 percent.

Over the past decade, rent as a share of income has shifted from being barely affordable to predominantly unaffordable for renters. The benchmark for affordability is 30 percent of income.

The majority of renters living in the City of Los Angeles are rent burdened, paying over 30 percent of their income for rent, and roughly a third are severely rent burdened, paying half or more of their income for rent.

Overcrowded housing is an ongoing concern in Los Angeles, where a fifth of renter households currently live in overcrowded conditions with more than one occupant per room and a tenth live in severely overcrowded conditions with more than 1.5 occupants per room.

The good news is that a dramatic decline in overcrowding has occurred during the past decade. There has been a 56 percent decrease in severe overcrowding. This is in large measure a result of smaller, older rental units being replaced by newer bigger units. The construction of a substantial number of new units during the past decade has also helped.

Long-term economic growth that increases productivity and wages in the Los Angeles region is needed to reverse this trend. There is also an urgent need to build more affordable housing and to preserve the existing inventory of affordable housing.